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Taxis


Cheh would limit regulation for Uber and taxi apps

"Sedan" cars like the ones the popular car service Uber uses, and any electronic apps that help people book either sedans or traditional taxis, would gain protection from most regulation under a proposal by Councilmember Mary Cheh.


Photo by Dkmelo on Flickr.

Cheh (ward 3), the chair of the committee that oversees transportation, released the "committee print" of her bill to legalize services like Uber. The committee will mark up the bill on Friday.

The bill, now entitled the Public Vehicle-for-hire Innovation Amendment Act of 2012, has a new section explicitly exempting most "digital dispatch services" from regulation by the DC Taxicab Commission. DCTC can still impose some requirements on "digital dispatch services," like Uber, Taxi Magic, Taxi Radar, or Hailo, but only for certain purposes:

  • Geography: Dispatch services can only use vehicles licensed in DC, or non-DC vehicles for trips to or from those other jurisdictions (a regional body, WMATC, which is totally different from WMATA, regulates these interstate trips.) However, DCTC also has to start licensing new drivers and vehicles.
  • Equity: The services and drivers will have to serve all parts of DC, and otherwise not discriminate against any passengers.
  • Receipts: Riders have to get an electronic or paper receipt after the trip. But unlike with the DCTC's proposed regulations, the service can choose; Uber, which gives everyone an electronic receipt, won't have to also add printers to every vehicle. Other services could use paper instead if they wished.
  • Transparent fares: Services will have to clearly tell riders about their pricing system, and give riders an estimate of the fare when they book. Uber doesn't do this now, but CEO Travis Kalanick said at the recent hearing that they were working on adding it already.
Services will also have to give DCTC regular data dumps of where their various trips started and ended, their times, etc. but no personal information about the rider. This could let DCTC better understand demand patterns, and perhaps they can ultimately release data files publicly, like Capital Bikeshare has done.

The bill does ban one current Uber practice: drivers rating passengers. Uber's system lets passengers give drivers a rating after their trip, which helps future passengers choose among drivers, but it also lets drivers rate their passengers. Cheh is concerned this could help drivers discriminate among passengers who want to go to unpopular locations, because of their background, or for other such reasons.

As for sedans, DCTC can regulate them to ensure they are safe or to protect consumers from fraud, but its regulatory power is otherwise limited. DCTC can also collect the same trip data from sedans. (They will get that data from taxis as well through the new electronic meters that recent legislation required for all taxis.)

Taxi companies would be able to operate both sedans and cabs, and drivers could even get a single license letting them drive both types of cars, but the cars themselves would remain separate. All taxis will be one uniform color beginning next summer, while sedans will remain black and more luxurious.

This keeps a strict separation between taxis, which are one type of vehicle that look one way and charge fixed rates, and sedans, whose rates aren't regulated. It means taxi companies can't start competing on value and raise prices, but it makes it more likely that the current taxi market remains largely as is while enabling services like Uber.

It also hopefully keeps the DCTC from going overboard with silly requirements for sedan services or taxi dispatch apps. These apps and services represent the best chance to bring new innovations and better service to potential riders.

I've reached out to Uber for comment about whether they support the bill, but hadn't yet heard back. I'll update this post if they respond.

Taxis


Taxi Commission proposed own Uber-style "surge pricing"

Late yesterday afternoon, the DC Taxicab Commission (DCTC) announced that taxis could charge an extra $1 per passenger when Nats playoff games are in town. Confusion and outrage ensued, and within 2 hours, Mayor Gray rejected the plan, and the commission has rescinded it.


Photo by JL08 on Flickr.

Ironically, this move has a lot in common with Uber's "surge pricing," which proposed regulations from the Taxicab Commission would forbid. It would apply from 2 hours before games start until 4 am the following morning.

The Taxi Commission posted a short notice last Thursday about the surcharge, but with few other details. It did not notify the media at the time.

The PR snafu, short notice, and poor timing sank the proposal, but had the commission handled the rollout better and avoided the firestorm, would this charge have worked?

What did the commission want to accomplish? Linton said in the news release,

We expect multiple riders to be using taxi services. The additional fare provides a fair compensation to drivers. It will also offer an incentive to deal with the increased congestion around the ballpark that could otherwise depress service, as well as assure service in other parts of the city.
At first blush, these reasons seem nonsensical and contradictory. The commission wants to encourage drivers to operate around the ballpark, so they have a surcharge to create an incentive for drivers to head to the ballpark. But then, they want drivers to not all cluster around the ballpark, so they have a surcharge for drivers to go elsewhere. Don't these just cancel each other out?

Commenters online seem to feel the same way. On the City Paper post, commenter "One City!" wrote, "I love this city so much. Whenever you think we've reached the height of absurdity, the DCTC is there to show you we still have room to grow." RedLineHero said on the Washington Post site, "What the H-E-double-hockey-stick kind of harebrained idea is that? a surcharge during the playoffs? You have GOT to be kidding me. Good on Mayor Gray for shooting that down."

Uber "surge pricing" gets more drivers on the road

This surcharge is actually a lot like popular car service Uber's "surge pricing." If demand gets high, Uber increases its fares, first to 1¼ normal, then 1½, and so on. Anyone who books a car gets a notification about the higher pricing before the car is dispatched. All of the extra money goes to the drivers.

At the recent hearing, Uber CEO Travis Kalanick defended the practice. He said that the primary reason is to increase supply. They don't want riders unable to book their cars. At busy times, by raising the price and giving drivers the money, he said, it encourages more of their drivers to get out on the road and serve customers.

By that logic, the surcharge makes some sense. Many drivers work at different times of day. A bonus for working at this likely busy time could actually encourage drivers to switch their schedules around if they can, and be available during games. Some could go to Nats Park and serve fares there, but since the surge price applies all around the city, it will also encourage drivers to serve other neighborhoods.

DCTC's explanations don't hold water

If this was the DCTC's thinking, they certainly didn't make it clear. Will Sommer at the City Paper wrote, "Taxi Cab Commission spokesman Neville Waters says the extra charge has two functions: ensuring that the city's cab drivers don't just swarm Nationals Park, and making trips more profitable for drivers who are stuck in stadium traffic." He quoted Waters saying that without the surcharge, drivers would only drive to the ballpark and nowhere else.

These reasons don't match the policy. If DCTC is worried drivers will only drive to the ballpark, why would a surcharge that applies in all neighborhoods have any effect? It doesn't make trips around the ballpark more or less appealing compared to others.

As for the second argument, compensating drivers for traffic is why the rates include both time and distance. The playoff games probably won't cause traffic jams any worse than other events in DC, and the commission doesn't authorize surcharges every time there's a motorcade. If the DCTC believes that large traffic jams cause drivers to unfairly lose money, then they should raise the per-minute idling rate instead of using surcharges.

However, if the DCTC actually just wants to get more cabs on the road, this surcharge isn't a bad way to do that. It would just help a lot for them to actually articulate the economic reasons.

Wakehead commented at the Post, "How about they have more taxis work for the Nats games? Or is the target service model 'lines and surcharges'?" A rational answer to this could be, "Actually, the surcharge does get more taxis to work the games; it's lines OR surcharges, not lines AND surcharges, and we chose surcharges over lines."

We don't know what was going on inside the Taxi Commission's heads, but they are behaving as though they have some vague and general sense of the economic levers they have at their disposal, but aren't able to actually discuss it in clear terms.

The same dynamic played out at the recent taxi hearing, when people like Kalanick seemed to be speaking one economics-based language, and Linton and members of the DC Council a different law-based language. Ultimately, they agreed with one another, but it took hours (and some taxi drivers who didn't speak in economics) to break through the language barrier.

DCTC might actually want to consider trying a surcharge at a future event, like the Inauguration, but explaining it better. Trying a surcharge could also help them gauge how much supply it adds; Uber is able to monitor their supply and demand in real time and adjust prices accordingly, but the Taxicab Commission can't do that.

If the commission does come to recognize that it's using demand-based pricing, perhaps that will also make it less hostile to practices like Uber's "surge pricing" and other innovative pricing arrangements from mobile apps and sedan services.

Update: Uber DC manager Rachel Holt wrote in with some helpful information from their surge experience:

From what Uber has seen, during big games demand during the game is usually extremely low. Most people in DC are watching the gameswhether at the stadium, or in bars, or at home, etc. By mandating the additional charges during the game, itself they are just further depressing demand (probably more than the amount of the increase), thus making drivers worse off during this period.

Taxis


Graham converts to deregulation over 8-hour hearing

Sometimes legislative hearings are just theater, but sometimes they actually educate elected officials about complex issues. Monday's hearing on Uber and other innovative taxi service models achieved the latter, especially for Ward 1 Councilmember Jim Graham.


Photo by joyride1x1 on Flickr.

Graham started out the 8-plus-hour hearing lamenting an "uneven playing field" between Uber, which can charge any prices and doesn't have to use Taxicab Commission-mandated technology, and standard taxis, where regulation both limits their income and increases their costs.

At the start, Graham sounded like he wanted to impose taxi-style rules on Uber. By the end, he had come to a different realization: the solution could be to let current taxis enjoy the same freedoms Uber does today.

The question that councilmembers and regulators will have to grapple with now is how exactly to let existing taxis compete with Uber. Will existing companies have to buy whole new fleets of black cars, or can they upgrade their existing vehicles?

At the start of the hearing, Graham noted that these regulations have come about because residents want higher quality. He sparred with Uber CEO Travis Kalanick, arguing that Uber sets prices instead of drivers (Kalanick disagreed, saying it was the product of a negotiation, and if drivers didn't like the prices, Uber wouldn't have any drivers) or that the money will go to Los Angeles because that's where Uber is based (Kalanick emphasized that most of the money goes to the drivers).

By the end of the hearing, though, Graham's tune had changed. He didn't stop believing that there was an uneven playing field, and he's rightthere is. But after a lot of very happy Uber drivers testified at the hearing, he concluded that letting more companies play on the Uber side of the field is the best approach.

It is. Many of the burdensome regulations are there to push higher quality, but Uber proved that higher quality can come from competition instead, at least when customers can voluntarily choose which taxi company to patronize.

How would that work? The Taxi Commission wants to create a new "S class" license for "sedans," or black cars, which drivers can get and then operate under an Uber-style model. Meanwhile, there will still be standard taxis you can hail on the street. Furthermore, apps like Taxi Magic (working in DC today) and Hailo (which plans to come to DC soon) let riders request a standard taxi using an app.

What's the difference between a sedan and a taxi?

Councilmember Mary Cheh (ward 3), who chaired the hearing, focused on a key question. You have Hailo to request a regular taxi, and Uber to request a "premium" car, but what's the difference, really? How could one set of cars have to operate under one set of taxi-style regulations, and the other under Uber-style, when both sets of cars respond to riders who request them through smartphone apps:

I suggested one option: Let all cabs run in Uber mode when picking up app-based hails. DC could deregulate rates even for dispatch calls like Hailo. Apps that let you request a taxi could also know what rates various cab companies charge; they would have to publish their rates in some standard format. A rider could pick a cab based on a combination of which one's closest, what their rates are, how many stars it got, and your prior experience with that company.

That could be somewhat complicated, however. Existing taxi apps don't work this way, and the Hailo CEO wasn't really into that approach. For one thing, Hailo doesn't know your destination in advance, so it couldn't easily estimate your fare under different pricing schemes.

Right now, Uber doesn't know the destination either, but Kalanick said they're working on adding that. Doing so would help riders a lot. Councilmember Muriel Bowser (ward 4) said she tried taking Uber downtown from her home, but "surge pricing" was in effect. It only told her that everything would cost 1.5 times as much, but not what that would mean for her total bill.

Taxicab Commissioner Ron Linton suggested a simpler difference between sedans and cabs. If you have an account with the company and it has your credit card on file, and when you request a trip it gives you the full fare in advance, then it can be a sedan trip; if not, it's a taxi trip.

Under this system, Yellow Cab could conceivably create Yellow Cab Premium, sign up some customers with accounts, get their credit cards, let them text message to reserve a car, and charge whatever rate they want. If their quality is good, people will probably use their service.

Can the same vehicle be a sedan and a taxi?

But are sedans and taxis two totally separate sets of vehicles? The current regulations require that all sedans be painted black, while all taxis will soon have to be a standard color. (Linton said that the commission will create and release 3 options for color and livery to get public comment, but he doesn't yet know what those options will be.)

This means that the hypothetical Yellow Cab Premium would have to buy a whole new fleet of different cars. Shouldn't we allow existing taxi fleets to compete with Uber? It would be great if Yellow Cab had an incentive to announce one day that they are going to spruce up the interiors of many of their cars, and anyone who signs up for Yellow Cab Premium will only ride in one of the top-condition cars with drivers who get good customer service ratings. Basically, the value proposition is, pay a little more, be guaranteed of getting one of DC's best taxi drivers and none of the worst.

This has value for all riders. Not only would there be higher-quality black cabs with higher-quality drivers, but pressure for existing drivers to offer good service and maintain their cars well. If that happens, even people who hail cabs on the street would benefit. On the other hand, if only completely separate fleets can make more money, there could be a trend toward the best drivers leaving the classic taxi market. There would then be fewer, and worse, cars available for street hails.

If companies can use existing cabs as sedans, then what is the difference between Hailo's app and Yellow Cab Premium's? If you request a car on Hailo, the driver makes a little less money just because Hailo doesn't know your destination? Maybe that will just lead Hailo to add Yellow Cab Premium as an option on their app. That gets us back to my original suggestion after all.

Regulations will get better

Linton agreed at the hearing that some of the proposed regulations will change. For example, he seems to have agreed with my argument that the requirement to have a local place of business, with "office furniture" and a receptionist during business hours, is silly. Instead, he said, they will just require the company to have a registered agent, so that official documents, court summons, and so on can be served to them. That's a common requirement for any company and totally reasonable.

Cheh asked if some more information about fuel efficiency could go on the Taxicab Commission's website, and Linton replied that they are only allowed limited web space. Cheh replied, "Well, that's not very persuasive." A few funny Twitter jokes about the Internet running out of room aside, this isn't the first time we've heard of limits OCTO, which runs the DC government websites, places on agencies, perhaps not with the best results.

The Taxicab Commission will revise their regulations, and it seems likely that they will end up at a place which doesn't unnecessarily burden Uber. Uber might have to start telling riders the fare ahead of time, which isn't unreasonable or that difficult, and they will have to ensure that a DC-to-DC trip uses a DC-licensed vehicle instead of a Virginia one, which also isn't unreasonable.

But they'll be able to keep operating, and most of all, other companies including existing drivers will be able to compete with Uber on the same terms. That would be the best outcome for riders.

Taxis


How much regulation is appropriate for Uber-like services?

This morning, DC Council Mary Cheh is holding a hearing on "innovation in the public vehicle-for-hire industry," or in other words, Uber, Taxi Magic, and other new technologies that are changing taxis in DC.


Photo by jhembach on Flickr.

I'm testifying, likely in the second panel. The head of London's taxi office, Uber's CEO and the head of less disruptive Hailo, will go first. There are also owners of a number of black car associations and taxi drivers.

You can watch the hearing online here; it's scheduled for 11:00, though hearings often don't actually start quite on time. I'll livetweet interesting tidbits @ggwash as well.

I will emphasize how over-regulation, possibly well-meaning, can often stifle innovative new services. In the taxi market, dispatched trips are fundamentally different from street hails. We need rate regulation for street hails because people cannot effectively comparison shop and negotiate for these trips.

We do not need the same regulation for dispatch cab trips. These cabs do need regulation to ensure they are safe, and that they serve all parts of the city and people with disabilities. A café needs regular health inspections to ensure that it does not poison its customers, but not regulation to specify the color of the counters, or the format of the receipts, or approval for every new dish on the menu.

Yet the Taxicab Commission's proposed regulations do just that, requiring, among other things, that any reservation service have an office in DC with a sign, a receptionist during business hours, and even specifically "office furniture." They micro-manage the technology in the cars, how customers get receipts, and elements of the pricing system.

Taxi Commission Chairman Ron Linton says he needs these rules to ensure that riders don't get overcharged, for instance. That's a laudable goal, but do we need the Taxicab Commission to ensure that? Restaurants don't have the same level of price oversight, and they don't overcharge people for a very simple reason: if they do, diners will complain. If the error doesn't get fixed, they won't go back, and will spread the word, harming the restaurant's reputation.

With the traditional taxicab model, riders are not repeat customers of individual cabs, so drivers have little disincentive to cheating a rider except the threat of enforcement action from the Commission. A reservation service, by contrast, relies on repeat customers and on its reputation, so it will take action on its own against misbehaving drivers, to persuade them to act properly and drop drivers from its service when needed.

This puts more power into the hands of individuals. They can pick a dispatch service or taxi fleet that provides quality service. If they aren't happy with the ride, they can pick a different company in the future. This power makes it less necessary for the Commission to specify detailed operating procedures or monitor performance.

Uber has not always made itself easy to support. They have chosen, now three times this year, to rile up supporters through statements which were at times misinformed or misleading. Some of their statements misstate the specifics of proposed laws or regulations, while others conceal the ways they were working with lawmakers and regulators.

However, creating an innovative marketplace is not about supporting Uber or not supporting them. It's about creating an environment for many independent dispatch services. If Uber simply supplants traditional taxis, riders will not necessarily be better off. They might have higher quality rides, but at a higher price, and without much more choice.

If, on the other hand, DC ultimately has 5 or 10 separate, competing dispatch services, there will be every incentive to improve service and keep prices low. That is the end toward which our public policy must aim. If the Taxicab Commission is not willing to create regulations in this spirit, the council should step in.

My (somewhat whimsically-formatted) testimony is here.

Taxis


Would new taxi rules "shut down" Uber?

The DC Taxi Commission (DCTC) has proposed new regulations for "sedan" services, rides you pre-arrange instead of just hopping in a cab driving down the street. Uber, a popular service that uses sedans, says the new rules will make their business impossible in DC, but DCTC Chairman Ron Linton says Uber is misreading the regulations.


Photo by magerleagues on Flickr.

In a letter to elected officials, Uber continues its aggressive rhetorical stance against regulators. Uber CEO Travis Kalanick writes:

These rules are not designed to promote safety, nor improve quality of service. They are intended to shut Uber and similar technology companies down. ... The rules, which the DCTC has published and coordinated to present at Mary Cheh's hearing on Monday, are a blatant attempt to shut small sedan companies down and therefore Uber's business. Our position is that any additional DCTC rule-making around sedans must be severely restricted.

Linton vehemently disputed that the commission is trying to attack Uber's business model. "I think [Kalanick]'s figured out that by being a bad boy he gets more attention, more publicity and more customers," Linton said. "We not only don't want to shut them down, we're trying to create a condition in which he and competitors" can compete. "We don't want to limit the competition, we want to have an open field."

The emotional intensity certainly has worked well for Uber thus far. A heated email about Mary Cheh's proposed regulations stirred thousands of residents to write the Council, even if the actual facts still remain in dispute at best. Maybe this is indeed a good lobbying strategy for startups in regulated fields: Build a great service that might be in the gray area of the law, accumulate a lot of happy customers, object loudly when lawmakers or regulators take unfavorable action, and channel customer energy to get better regulations.

As with the the last few rounds of the Uber battles, the folks from the government argue Uber is reading the laws wrong. Uber's letter alleges, for instance, that one of the provisions limits all trips to start and end within DC, but a closer look (§1405.1) shows that it also exempts trips that comply with the reciprocal agreements DC has with surrounding jurisdictions.

This provision changes nothing in the law, Linton said, except requiring the dispatch company, like Uber, to ensure that it's dispatching a vehicle allowed to make that trip. If it stays within DC, it has to be a DC-licensed sedan, but someone going to Virginia could use a DC or Virginia sedan.

Companies need a minumum of 20 vehicles

§1401.5 of the rules says that any "sedan company or association" must have 20 or more vehicles. In a telephone interview, Kalanick said that such a rule would "shut down pretty much everyone we partner with." Uber's sedan drivers are individual operators who own a single sedan, or in a few cases, a handful of cars.

But Linton said Uber "needs to have some lawyers read the regulations who know how to read regulations." He explained that this rule doesn't apply to individual operators, who aren't part of a "sedan company or association." Linton did say that such an operator wouldn't be allowed to have 2 or 3 vehicles under this rule, which has long applied in DC to all "public vehicle for hire" companies. "We don't accept anything between 1 and 19," Linton said.

Why is this? Linton said "it's historic," and added that changing it would make the commission's workload too great. They have 116 taxi companies now, and don't want 2-300. Workload is also a reason they have not been authorizing new sedan operators for some time, one reason Uber drivers' cars are registered outside DC.

It seems that this rule should change. But the commission's workload is not a good enough reason to refuse business licenses to anyone. Our economy usually does not, and never should, operate on a principle that you can't engage in smaller-scale economic activity because the government is too busy to review it. Some reasonable approval process may be appropriate, but if the regulatory agency is too busy to handle approvals, they ought to either get more budget or authorize more applications without such detailed review.

Sedan drivers will need a handheld printer

The rules also require each taxi to contain a "handheld device," with the capability to to print a receipt, send a receipt electronically, and/or audibly read out the fare. It also has to track vehicles using GPS and upload that information to DCTC.

Kalanick said it would be prohibitive for Uber to create a compliant device. Given that that their current system of using an app or text messaging is working well for its users, he asked, "what problem are they trying to solve?"

Linton said the problem is to ensure that drivers don't scam customers. He noted that drivers already have devices like these that they are using today. When the trip is done, the drivers have to hit "complete." They could hold it in front of the passenger to show they've hit complete, but it would be easier, Linton said, to just have the device print out a receipt.

Is that technically difficult or expensive? Linton said, "I understand it's no big deal to be able to have a printing device on them." What if Uber's devices are functioning well without these requirements? Linton said that Uber will surely claim that, but they have gotten a few complaints, it's the commission's job to ensure that riders get charged fairly.

Kalanick, though, worries that every time Uber wanted to add a new feature, they would have to change the physical devices and get the commission's approval. That would hinder innovation, he said.

Dispatch services need to have a place of business in DC

Another potentially problematic rule is §1403.1:

Each person operating a sedan company or association in the District of Columbia and each person operating a sedan vehicle reservation service operation in the District of Columbia or offering reservation services to any sedan vehicle licensed in the District of Columbia, whether by central dispatch, mobile phone or other electronic device communication or other form of digital dispatch shall maintain a bona fide administrative office in the District of Columbia.
Uber has a place of business in DC, so this wouldn't affect them, but why should DC require this for reservation services? Linton said that every company that does business in DC needs a business license, and this is no different.

What about an Internet e-commerce company that ships goods here? If I buy something from them, they don't need to be a DC-licensed business, even though I am doing business with them. A taxi dispatch service seems more analogous to that.

Taxi Magic is in Alexandria. Do they need a DC office just to have an app that lets you reserve DC Yellow Cabs? Linton said, "That is good enough, they are in Alexandria, we don't fuss with them about that. We're talking about companies that are located in San Francisco, Boston, or New Orleans. We can't reach them."

However, the regulations don't explicitly exempt Alexandria businesses. Having DCTC just not enforce the rule against some companies is not a good approach. And why is the ability to "reach them" the issue? DCTC could set up rules for such services that work with DC-licensed sedans whether or not they have an office in DC.

Debate will continue Monday

Councilmember Mary Cheh (ward 3) is holding an oversight hearing on sedan services Monday. I'll be participating, and plan to repeat the points I've made before. There's a role for regulations, but we should err on the side of less prescriptive ones, rather than more.

Uber is bringing more choice to District travelers. Whether or not you use their service or not, we want to foster more options rather than fewer. We want to enable other companies to create taxi dispatch services. Linton wants that too, but making it succeed requires making the barriers to entry as low as possible, and sometimes the regulations get in the way.

Do these? Linton said that he's talked to the heads of several other current or aspiring taxi dispatch companies, and they don't have a problem with the regulations. Taxi Magic Director of Marketing and Communications Matt Carrington said, "Our platform is reforming the taxi industry through technology (as opposed to disrupting it)."

Kalanick agrees that regulators have certain legitimate goals, listing "safety, accessibility, and transparency." Rules which ensure that cabs are safe make sense, as are ones that guarantee that services won't discriminate against people in certain parts of the District.

If regulations don't directly advance those ends, or if they put up barriers to Uber or new services, DC should steer clear. But some regulations will serve an important goal, and then it will do a disservice to District riders if Uber rallies its customers to oppose them without all the facts.

Taxis


David & Bruce talk Uber

I talked with Bruce DePuyt today on NewsTalk about taxi service Uber, the recent debate about how and whether to regulate it, and what's next.

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